You’re in debt. So was I. So are many people, especially in this economy. For a list of reasons too varied and long to mention a growing number of Americans find themselves deeper and deeper in debt. It is a thief that steals from you once a month. Debt is liberties great enemy. It limits you from doing the things you enjoy the most. It is a strain on you and your family. We need to get out, you need to get out. The sooner you do the better you will be.
How? Controlling spending is the first step. If possible, earning more is another. Just as important is reducing your interest rate. A high interest rate is a weight holding you back from your goal. If you have $7000.oo in debt and a 20% interest rate you are paying $1400.00 in interest a year. Its not a good or a service, you aren’t getting anything from it. It’s more or less wasted money. Poof!
You have to eliminate that interest rate. You have to take it down to zero if you can. Many cards will offer a zero percent interest rate, but almost all of them charge a transfer fee. This fee can be hundreds of dollars. Sure, its better to pay the fee and get the great rate, but here at PBB we are not too keen on fees. So to avoid the transfer fee we found the Slate from Chase Visa Card. It is a 0% fee-less balance transfer card that gives you that rate for 15 months. It is a great tool in fighting debt.
Let me demonstrate with an example. Let’s say someone has $8000.00 in credit card debt and they have committed to paying $400.00 a month towards paying it off.
- In Scenario A: This person transfers the debt over to the Slate Card and makes their monthly payment of 400 dollars. At the end of the first year they have paid $4800.00 and lowered their debt to $3200.00. Three months into the second year the 0% offer ends and they are left with $2000.00 that they transfer to another 0% card and pay a 100 dollar transfer fee. After five months the debt is paid. This individual went from 8 grand in the hole to debt free in 20 months.
- In Scenario B: This same person doesn’t make the transfer and keeps paying the 20% interest and also decides to pay 400 dollars a month. After the first year they have paid $4800.00 as well, but they have been charged around $1500.00 in interest. After one year their debt is not $3200.00 it’s $4700.00. In the next year they pay another $4800.00, but interest strikes again. Another approximately 500 dollar on top. In the first month of the third year they will be debt free.
In the first scenario you paid off your debt in 20 months and paid 0 dollars in interest. In the second it took you 25 months, 5 months longer and cost you nearly 2000 dollars in interest to service the exact same debt. Two grand is a nice vacation, or a down payment on a car. Needlessly lost to interest.
While cards that give you 6% off of groceries, or 5% off gas are great, eliminating debt should be a top financial priority. Once you are out of credit card debt options like starting a small business or going back to school become much more viable. Eliminating credit card debt would most likely improve your credit score which can help you get a lower interest rate on big items like car loans or mortgages. The benefits of this decision with ripple across your life for years. It could all begin with some budgeting, dedication and the Slate Card.